The global economy in 2024 continues to be shaped by the lingering effects of the COVID-19 pandemic, climate change impacts, geopolitical tensions, and technological disruption. While some progress has been made, many challenges remain.
Economic Growth Trends
The global economy is projected to grow around 2.5% in 2024, a slight decrease from 2023. Advanced economies like the United States, Europe, and Japan are expected to grow modestly at around 1-2%. Developing countries will see faster growth of 3-5% driven by countries like India and Vietnam. China’s growth is slowing to around 5%.
Overall global growth remains fragile and uneven across countries. Rising inflation, high debt levels, supply chain issues, and tightening financial conditions are headwinds. The war in Ukraine has increased food and energy costs worldwide. The pandemic after-effects and climate events also continue to negatively impact growth.
The global recovery from the pandemic has been unbalanced between advanced and developing countries. Advanced economies have greater access to vaccines and resources for large stimulus spending. Developing countries face vaccine inequity, limited policy support, and pressures from food and energy inflation. This divergence is likely to persist in 2024.
Supply Chain Disruptions
Global supply chains continue to experience significant disruptions in 2024. The pandemic, climate disasters, and geopolitical conflicts have severely hampered cross-border trade and exposed the vulnerabilities of complex international supply links.
Shipping costs remain well above pre-pandemic levels, though have moderated from the peak seen in 2021. Chinese lockdowns have periodically closed key ports like Shanghai. Factory shutdowns, chip shortages, and labor shortages have also constrained production. Reconfiguring supply chains to be more resilient will take substantial time and investment.
Russia’s invasion of Ukraine has specifically disrupted key commodities like oil, natural gas, metals, and agricultural goods. Both Russia and Ukraine are major global suppliers of wheat, fertilizers, and neon gas used for chipmaking. Global coordination efforts are underway to limit price spikes and shortages. But replacing these suppliers will challenge trade flows.
Trade Policy Environment
The global trade policy environment remains largely favorable but faces uncertainty in 2023-24. No major new trade agreements are likely to be enacted. However, the U.S.-Mexico-Canada (USMCA) and U.S.-Japan bilateral deals solidify key North American and Asian trade ties.
The Biden administration is focused on rebuilding strained trade relations. It is working to mend disputes with the EU and adjust tariffs imposed on allies by Trump. But tensions with China remain over technology issues, Taiwan, and human rights. Decoupling efforts by the U.S. and China will bifurcate technology trade and investment.
At the WTO, members agreed to refrain from export restrictions on food purchases from the World Food Program. But broader reforms at the WTO remain stalled. Progress is slow on issues like e-commerce rules, fisheries subsides, and IP waivers for vaccines. The watchdog’s role in settling trade spats faces criticism.
No major new regional trade deals like the TPP or TTIP are moving forward either. But existing pacts like the CPTPP and RCEP will expand intra-regional Asian trade. Trade liberalization faces backlash too from populists in the U.S. and Europe. But outright protectionism has not increased dramatically.
Key Regional Economic Trends
United States: The U.S. economy will grow around 2% aided by continued consumer strength and investment. But high inflation above 7%, an inverted yield curve, and quantitative tightening risk a potential recession by end-2024 or 2025. Trade flows are disrupted by the strong dollar.
European Union: The EU economy will grow 1-1.5% dragged down by the Ukraine war’s impacts on energy and food costs. The ECB has finally raised interest rates to combat inflation but remains dovish. Internal divisions persist on fiscal stimulus policies. Brexit headwinds continue for UK-EU trade.
China: China’s economy is slowing to around 5% amid property market weakness, sporadic lockdowns, and strains on its zero-COVID policy. The government provides stimulus through infrastructure spending, tax cuts, and liquidity support. But global recession risks loom. Trade tensions with the U.S. and allies like Australia and Canada remain.
Japan: Japan will grow 1-1.5% supported by strong multinationals, employment, and industrial production. But rising energy prices, a weak yen, and COVID restrictions cloud the outlook. Its economy remains dependent on exports amid a shrinking population.
Emerging Markets: Emerging economies face food and energy cost pressures. But higher commodity export revenues benefit some countries. Consumption and investment demand remains robust. Supply chain localization trends create opportunities. But interest rate hikes strain finances.
India is poised to grow over 7% as manufacturing, services, and investment strengthen. ASEAN averages 4-5% growth led by Vietnam, Philippines, and Indonesia. Higher oil prices benefit Mideast energy exporters like Saudi Arabia and UAE. Latin America grows 1-3% with Brazil and Mexico seeing around 2%.
Key Industries and Trade Developments
Automotive: The auto industry is recovering slowly from chip shortages but supply chains remain strained. EV investment is surging in Europe, China, and the U.S. Trade in both ICE and electric vehicles continues to grow.
Energy: Global energy trade faces challenges as the world transitions from fossil fuels. Russia’s role as a major oil and gas supplier has declined. Europe is securing new LNG sources but faces shortages after banning Russian energy. OPEC+ constrains oil supply amid high prices.
Agriculture: Food protectionism is rising as Ukraine’s exports are blocked. Argentina raised soybean export taxes. But trade in agriculture overall continues to grow driven by population and income gains. Climate change adaptation is critical.
Technology: Technology and digital trade continue to rapidly expand. But U.S.-China decoupling will bifurcate flows. Supply chain localization pressures rise. The new Indo-Pacific Economic Framework strengthens U.S. ties on tech standards and digital rules.
Services: Global services trade has rebounded from the pandemic but remains 5% below pre-COVID levels. Travel, transportation, and entertainment services lag while remote services like IT and finance grow. Services trade faces localization pushes.
Key Themes Ahead
the global economic and trade outlook faces considerable uncertainty in 2024. But a few key themes stand out:
- Persistent supply chain disruptions and higher logistics costs
- Partial economic decoupling between the U.S.-China and broader geopolitical tensions
- Continued expansion but localization pressures in services and technology trade
- Reshuffling of energy and commodities trade flows due to Russia-Ukraine war
- Rising food protectionism and agricultural trade restrictions
- Emerging markets leading growth but facing financial stability risks
- Ongoing expansion of regional trade pacts, but limited new multilateral deals
To promote recovery and resilience, policymakers must prioritize supply chain strengthening, technology cooperation, food security, clean energy transitions, and inclusive trade growth. The global trading system continues to evolve in a more fragmented direction. But fostering openness and adaptation will be vital to optimizing trade’s benefits in 2024 and beyond.